You're in an accident and you go see an attorney. He gives you a copy of his fee agreement to sign. It looks longer than you thought it would be.
You don't know much about the law, but from what you've heard and seen, in a personal injury case you don't pay unless you win money. “We don't collect unless you get paid,” you've seen in hundreds of TV ads.
So is that true?
Does that mean you shouldn't sign? Not necessarily, but you need to know exactly what it says before you do.
If you hire an attorney for a personal injury case, you will likely sign a contingency fee agreement.
In simplest terms, your lawyer's fee depends on how much you win. In legal terms, your lawyer's fee is contingent on the outcome of the case. This is completely unlike a criminal fee agreement, where you generally pay your attorney a flat fee regardless of whether your found guilty or not guilty.
That sounds simple, right?
Basically, yes, but if it were that simple, your fee agreement would have been 2 sentences, not 2 pages. So what else is in there?
Let's break down the main issues in a contingency fee agreement.
1. How much money will my attorney get?
This is literally the million dollar question. Obviously, the most important question by far.
The answer: it depends.
Most contingency fee agreements are structured so that your lawyer makes more money the longer the case takes to settle.
Take a typical car accident case. If you settle the case quickly with the other driver's insurance company, your lawyer may take 25 percent. If you actually have to file a lawsuit, your lawyer may get 33 percent of any settlement. If you have to go to trial (or schedule a trial), your lawyer may get 40 percent. Think of this as an escalator clause.
Why is this important? You should know that your lawyer may get a big chunk of your money in the end, and you should know when every fee increase kicks in.
2. Do I have to pay my lawyer's costs?
Probably, but not until the end of your case--after you receive your settlement.
In that case, you will likely reimburse your attorney for his out-of-pocket expenses.
And if your lawyer's good, he's spending money. If you go to trial, your doctor's going to have to testify about the extent of your injuries. (If you thought lawyers' fees were expensive, wait until you see how much doctors charge for their time.)
Your lawyer has to file a lawsuit, track down witnesses, depose the other driver, pay for a transcript of the deposition, depose other witnesses. Maybe the car accident is complicated, and your attorney needs to hire an accident reconstruction expert to prove that the other driver was at fault, and not the other way around. What do these things all have in common?—they cost money.
3. What happens if I fire my attorney?
3. What if I fire my attorney? It happens. Sometimes it's not a good fit, and you hire someone else. So you know you don't have to hire your first attorney, right?
Most lawyers have built into the agreement what happens if they're fired—or “discharged” as we like to call it, probably because it sounds less painful. Pay careful attention to this clause. Does your first attorney collect a portion of your eventual winnings? Or do you have to pay him his hourly rate for how much work he performed before he was fired? And what is that rate.
This issue is important for two reasons. First, obviously, now two lawyers are dipping into your pockets, and second, you should think twice about whether firing an attorney makes financial sense.
4. What money gets taken out of my settlement?
Another big question. Let's take a hypothetical 100K award that you win after trial, and under your agreement, your attorney takes 40 percent. Your attorney also spent 5K preparing for the case. Now let's imagine two different types of expenses provisions: “off the top” and “off the bottom.”
In the “off the top” contract, your lawyer gets 40K of your 100K settlement (40 percent)—but in fact, he only truly won 35K because he threw 5K into the case. But in the “off the bottom” contract, your attorney takes his 5K costs from the 100K settlement and then gets 40 percent of the remaining 95K. So in the “off the top contract,” you as the client get 60K.
But in the second “off the bottom” contract, you only get 57K. Maybe not a big deal in a small case, but you can see how the difference ads if your attorney has to spend a lot of money prosecuting your case.
5. Do I pay my attorney even if I lose my case?
Nothing feels worse than getting injured, receiving medical treatment, dealing with insurance, hiring an attorney, investing yourself in an emotionally draining trial, getting deposed, turning over personal documents to the defendant's lawyers, and then hearing a jury tell you “sorry, we don't believe you.” You get nothing. But what about if you're attorney demands costs?
This is the thing personal injury lawyers don't tell you. You will never see this on their Facebook ad or the billboard staring down at you while you're driving through the city. “We don't collect, unless you get paid… but sometimes we do.”
And personal injury lawyers can do this because it's perfect legal. Under the lawyer rules of professional conduct, lawyers can charge costs “whether or not the client is the prevailing party,” so long as they make clear in the fee agreement what costs are reimbursable.
So, yes, every personal injury slogan you've ever read may be wrong. I say “may” because personal injury attorneys may agree to eat their costs if their client doesn't win.
So now what do I do?
So now you're in a better position to decide whether to sign your contingency fee agreement. But you're still confused. What should you do?
1. Ask for clarification.
If the lawyer won't explain it to you, or says everything in there is just “standard” (code word for you're getting a bad deal), or seems vague, then run away. You definitely don't want this attorney.
2. Run it by another attorney.
Who better to understand lawyer's document then another lawyer? Find someone you trust, and ask her point blank: Is this fair? Can I do better with someone else?
If you're interested, you can learn more about our contingency fee agreements for personal injury cases.